Alarming level: SBP-held foreign exchange reserves decline $303mn to $7.6bn

Foreign exchange reserves held by the State Bank of Pakistan (SBP) dipped $303 million, clocking in at an alarming level of $7.6 billion as of October 7, 2022, according to data released on Thursday.

Total liquid foreign reserves held by the country stood at $13.25 billion, said the SBP on Thursday. Net foreign reserves held by commercial banks amounted to $5.65 billion.

“During the week ended on October 7, 2022, SBP’s reserves decreased by $303 million to $7.596 billion,” said SBP. “This decrease was entirely attributed to external debt repayments, which included repayment of a commercial loan and interest payment on Eurobonds.”

In September, SBP's reserves had increased as the central bank received the $1.2-billion tranche from the International Monetary Fund (IMF).

The Saudi Development Fund also rolled over a $3-billion deposit with the SBP, an amount that was due to mature in December 2022. However, this development was not meant to increase foreign exchange as the amount was already part of SBP's reserves.

The reserves’ position is critical for Pakistan which has been desperately seeking dollar inflows to meet its balance-of-payments needs.

A low level of reserves caused severe pressure on its currency market with the rupee witnessing its worst monthly performance in July in over 50 years. The rupee gained some ground as Pakistan met all prior conditions of the IMF, a development that helped it secure $1.17 billion of inflow under the Extended Fund Facility (EFF), but came under pressure once again as floods hit and import restrictions eased.

The local currency has staged a recovery over the past few days, closing at Rs218.38 per dollar on Thursday, as markets factored in the return of Ishaq Dar as finance minister, with the bullish trend prevailing due to sentiment.